Commodities take TSX up, oil pushes past US$81; N.Y. up on earns, Fed outlook

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(The Canadian Press)

By Malcolm Morrison, The Canadian Press

TORONTO - The Toronto stock market advanced Wednesday afternoon, led by sharp gains in mining stocks amid sharply higher metal prices while investors were encouraged by positive earnings news and an indication from the Federal Reserve that conditions are improving.

The S&P/TSX composite index gained 36.5 points to 11,574.6.

The Canadian dollar surged about a cent day after losing almost two cents Tuesday. The slide was triggered by the Bank of Canada, which announced it was keeping its key rate at 0.25 per cent, strongly indicated a rate hike won't happen until the middle of next year - and delivered a clear warning of the damage being done to the economy by the surging currency.

However, on Wednesday, U.S. dollar weakness sent the loonie ahead 0.95 of a cent to 96.12 cents US.

The base metals sector was up 2.9 per cent as the December copper contract on the Nymex was ahead 10.4 cents at US$3.036 a pound. Copper has surged more than 19 cents or 6.7 per cent this week because of American currency weakness and optimism that China will meet or exceed growth targets this year. Teck Resources (TSX: TCK-B.TO) gained 56 cents to C$34.92 while HudBay Minerals (TSX: HBM.TO) climbed 33 cents to $14.99.

The energy sector was ahead 0.76 per cent flat as the December crude contract on the New York Mercantile Exchange jumped $2.24 to a fresh 2009 high of US$81.36 a barrel as U.S. gasoline inventories fell by 2.3 million barrels last week. Suncor Inc. (TSX: SU.TO) gained 41 cents to $40.28 and Canadian Natural Resources (TSX: CNQ.TO) ran up 86 cents to $77.52.

Crude has been running up sharply over the past week to levels that could start causing problems for the pace of an economic revival.

"It's going to eat into spending, into the economy absolutely," said Phillip Petursson, director of institutional equities at MFC Global Investment Management.

"It drives margins down because basically transportation is a part of just about everything - not only on the consumer side but also in goods manufacturing."

December gold moved up $5.90 to US$1,064.50 an ounce and the gold sector edged up 1.25 per cent. Barrick Gold Corp. (TSX: ABX.TO) advanced 83 cents to $40.49.

The TSX Venture Exchange moved up 4.35 points 1,343.94.

Performance has been muted on the TSX in recent days despite a steady parade of well-received U.S. earnings reports.

But analysts point out that the TSX is up more than 50 per cent from the lows of early March as investors forecast that earnings and economic performance would justify such a sharp runup.

Now, it may be time for markets to consolidate those strong gains.

"Expectations were already built into the market, I think," added Petursson.

"I think a more realistic scenario - and the optimistic scenario - is that we only trade sideways over the next little while as earnings continue to catch up with expectations."

New York's Dow Jones industrial average gained 26.4 points to 10,067.9 as the Fed's latest snapshot of business conditions nationwide finds "many sectors" of the economy either stabilized or logged modest improvements over the last six weeks. The pickups, though, often were from "depressed" levels of activity.

Still, the new report adds to evidence that the worst recession since the 1930s is over and that a recovery has started. .

The Nasdaq composite index gained 12.73 points to 2,176.2, supported by a well-received earnings report from Yahoo Inc., while the S&P 500 index added 5.2 points to 1,096.25.

Morgan Stanley was another investor favourite, up $2.22 to US$34.74 as the U.S. bank returned to profitability for the first time in a year as stock and debt underwriting by its investment banking division more than offset US$400 million in losses from commercial real estate

The New York-based bank says it earned $498 million, or 38 cents per share, well over expected earnings of 27 cents per share.

And Yahoo Inc. reported after Tuesday's close that it more than triple its third-quarter profit from last year to top analysts' relatively low expectations for the troubled Internet company.

But the results released Tuesday also showed Yahoo's revenue fell by at least 12 per cent for the third consecutive quarter. That revenue rut means Yahoo still has a long way to go on its comeback trail but its shares rose 61 cents to US$17.78.

Boeing said lost US$1.6 billion in its third quarter because of problems with its long-delayed 787 and a new version of its 747 jumbo jet. That prompted the airplane maker to slash its profit forecast for 2009 and its shares lost 89 cents to US$51.

Elsewhere in the industrials sector, Canadian National Railways (TSX: CNR.TO) said after the market close Tuesday that quarterly profits dropped 16.4 per cent to $461 million. Revenue fell 18 per cent to $1.85 billion.

CN Rail (TSX: CNR.TO) announced Wednesday it has ordered 70 new high-horsepower locomotives from General Electric and Electro-Motive Diesel Inc. Financial details were not disclosed and its shares traded down 45 cents to $54.59.

In other corporate news, Jaguar Financial Corp. (TSX: JFC.TO) says it opposes a proposed $192-million takeover of nickel mine developer Canadian Royalties Inc. (TSX: CZZ.TO) by Jien Canada Mining Ltd. Jaguar says holders of Canadian Royalties debentures should receive all of their principal plus a premium, not 80 cents on the dollar as proposed by Jien. Canadian Royalties shares lost three cents to 76 cents.

Inter Pipeline Fund (TSX: IPL-UN.TO) has boosted monthly distributions to 7.5 cents from seven cents a unit. It also raised distributions on an annualized basis to 90 cents from 84 cents after an operating and financial review. Its units rose 32 cents to $10.47.